Did the National Minimum Wage Affect UK Prices?

Jonathan Wadsworth

CEP Discussion Papers from Centre for Economic Performance, LSE

Abstract: One potential channel through which the effects of the minimum wage could be directed isthat firms who employ minimum wage workers could have passed on any higher labour costsresulting from the minimum wage in the form of higher prices. This study looks at the effectsof the minimum wage on the prices of UK goods and services by comparing prices of goodsproduced by industries in which UK minimum wage workers make up a substantial share oftotal costs with prices of goods and services that make less use of minimum wage labour.Using sectoral-level price data matched to LFS survey data on the share of minimum wageworkers in each sector, it is hard to find much evidence of significant price changes in themonths that correspond immediately to the uprating of the NMW. However over the longerterm, prices in several minimum wage sectors - notably take-away foods, canteen meals,hotel services and domestic services - do appear to have risen significantly faster than pricesof non-minimum wage sectors. These effects were particularly significant in the four yearsimmediately after the introduction of the minimum wage.

Keywords: Minimum wage; prices (search for similar items in EconPapers)
JEL-codes: J6 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-lab
Date: 2009-08
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Persistent link: http://EconPapers.repec.org/RePEc:cep:cepdps:dp0947

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